winning themes - indian fashion and lifestyle market include apparel accessories, bags, wallets,...
TRANSCRIPT
Debashish Mukherjee Partner Head, Consumer & Retail, India
Winning Themes - Indian Fashion and Lifestyle Market
March 15, 2016
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 2
The Fashion & Lifestyle market is estimate to be ~INR 221,000 Cr and is poised to grow ~12% CAGR over the next 5 years
Market Sizing
Projected growth of Fashion & Lifestyle in India
1. Note: Of the total apparel market, approx. 40% is Fashion & Lifestyle, arrived at by excluding rural apparel spend, RTS, uniforms and sarees
2. Accessories include apparel accessories, bags, wallets, belts, fashion jewelry, time wear and eyewear Source: Images Fashion Yearbook, Industry and company reports, A. T. Kearney analysis
Key Drivers
• Changing Demographics
– Increase in disposable income
– Increase in urbanization
• Increasing Fashion Consciousness
– Youth/Westernization, influence of Bollywood/ Hollywood
• Premiumization
– Increase of international players, expansion of luxury brands
• Internet retailing (access, impulse buys)
– Increase in product mix, access to tier 2,3 cities
66
35
+15%
2020
Footwear
+12%
Accessories1
236 (59.9%)
394
221
Apparel
103 (26.1%)
55 (14%)
2015
128 (57.2%)
73 (34%)
19 (8.8%)
2010
109
8
(INR ‘000 Cr) CAGR
(’15-’20)
23%
7%
13%
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 3
Growing income, middle-aged population and urbanization will drive future shopping trends
Population split by annual household income
3%
2025
89
15%
34%
23%
24%
2015
44
9%
33%
34%
9% 15%
Deprived (<0.9 Lakh)
Aspirers (0.9 - 2 Lakh)
Seekers (2 - 5 Lakh)
Strivers (5 - 10 Lakh)
Global (>10 Lakh)
Demographic Shift
Population Profile
25%25%23%
2025 2015 2010
Proportion of Women in Workforce
Source: World bank, news articles, Census data
Brand
Women buyers
Casualization
New customers
2015 Population = 1.31 bn
0-4
5-14
15-24
25-34
35-44
45-54
55+
Population split
13.0%
10.5%
13.4%
16.5%
18.3%
18.8%
9.5%
15.7%
11.5%
14.5%
16.2%
16.8%
16.9%
8.3%
2025 Population = 1.46 bn
Age Bracket
Market Trends
72.6% 71.5% 70.4% 69.4%
27.4% 28.5% 29.6% 30.6%
2005 2010 2015 2020 (E)
Urban population Rural population
Rural vs. Urban Population Split (%)
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 4
To win in this context, there are six key themes for fashion and lifestyle players
Key Winning Themes
1 Create new fields of play
2 Differentiate
3 Tailor
4 Expand access: win in Digital / rural reach
5 Build capabilities to deliver on ‘fast fashion’
6 Design for low cost
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 5
1. Are Indian organized retailers paying attention to Women’s? India is one of the few (only?) countries where Men’s apparel share is higher than women’s and that is changing
1. Create new field of play & exploit “white” spaces
India dynamics: Women’s still under
indexed in MT
• Women’s apparel growing faster than Men’s… expected to similar in size in 2015-2016 (around 40% each)
• Share of women’s apparel in organised retailers still lesser than men’s
• Several women’s only brands (W, Biba etc.) but relatively small compared to demand
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 6
1. Leading lifestyle players are able to identify the “white” spaces or create new play areas in the market
1. Create new field of play & exploit “white” spaces
Identify White Spaces
Source: A.T. Kearney analysis, Forbes
Segments like Kidswear, Ethnic, once “white” spaces, are now well penetrated by players like Gini & Jony, FabIndia, Biba. Players are exploring newer niches to carve out space for themselves
White Space
“Sport”
Plus Sizes
Teen (Age: 14-18)
Women Ethnic Fusion
Create New Play
• Exploit broadening clothing needs
• Create new occasions
– E.g. Premium men’s club wear and party wear
– Active wear and sportswear
– Fusion wear
• Play the educator role to create demand (push)
Example: Leading players in the space
Specific sport / semi formal range by Van Heusen and Louise Philippe
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 7
2. Fashion players need to create a differentiation (= focus) in line with their value proposition
Value Proposition Elements
Source: A.T. Kearney analysis
Super Premium Apparel
Mass Department Store
Fast Fashion
Quality Price Brand
Image
In-Store
Exp
Assortment Fit Fashion
2. Differentiate
Extent of Differentiation
Low
High
Elements of Differentiation
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 8
2. For example, there is significant room to improve differentiation “focus” for Indian fashion brands
Uniqlo Primark Indian Brand 1 Indian Brand 2
Revenues (USD Bn)
8-9 3-4 0.4 0.3
Formal Shirts
# Designs1 18 14 431 144
Fabric Type
• 100% cotton, PC, linen-cot
• Multiple colours / style (upto 16)
• Very few 100% cotton
• Few colour options
• Cotton, linen, PC
• Varying colour options
• 100% cotton
• Few styles with colour options
Casual Shirts
# Designs1 1 5 678 55
Fabric Type • Treating formal
and casual shirts as common
• Denim, PC
• Few colour options
• Cotton, linen, PC
• Varying colour options
• 100% cotton
• Few styles with colour options
Knitwear2
# Designs1,2 13 6 1575 136
Design Type • ~160 graphic tees
– 2 price points
• Few changes between options
• Few prints in graphic tees
• High variety with minor variations in design
• High variety in t-shirts with minor variations in styling
Product Range Example – Tops (Mens)
1. Design at a cut-make level – multiple colour / pattern (solid / check / stripes) options within a design, style level for PFRL and all denims, knits 2. Graphic tees removed from design – no visibility into changes in cut-make (except in Brand 1) Source: Company websites, annual reports, Brand 1 and Brand 2 internal data for AW14, A.T. Kearney
2. Differentiate
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 9
3. Retailers need to customize their brand and product offering across different regions and city tiers
3. Tailor C
usto
me
r re
leva
nce
Performance
Brand 8
Brand 4 Brand 5
Brand 3
Brand 1
Brand 2
Defining retailer’s overall strategy
Retailer’s
overall
strategy for
each brand
needs to be
reflected in
the brand
assortment
choices made
at a store
level
Example: Offering customization
Footwear: E.g. Metro
• Heel height: High heels in Chandigarh, while much smaller in Kolkata
• Shoe Color : Higher range of “white shoes” in the South
Destination Preferred
Occasional
Convenience
Apparel fabric, sizes
• Lighter fabric top-wear in South
• Larger kids’ size clothes in East
Metro
Tier 1
Tier 2
Tier 3
Small store
Medium store
Large store
Apparel assortment
• Higher fashion focus in metro, Tier 1 cities
Source: Press Search, A.T. Kearney analysis
Assortment customization
Assortment customization
Assortment customization
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 10
4. Connected consumers in India has clear preference for online shopping… this cannot be ignored anymore
62%
54%
India Global
% Respondents who prefer to shop online
Online Shopping Destinations (% respondents)
18%
24%28%28%30%30%32%
39%
84%
8%
20%
41%44%
32%
45%
32%
23%
8%
Drug store
Department store
Mass merchat
Travel aggregator
Ticket Airline or hotel
Specialty store
Pure-play online retailer
Flash sale
Global
India
4. Access: win in digital / Expand Reach
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 11
4. There is strong potential for Fashion brands to expand reach and gain scale in India
Total
~430
Tier III
~300
Tier II
~65
Metro
and Tier I
~65
8 16 95
Potential catchment areas in India (No. of catchment areas)
No of cities
147147190206304
363
Ralph
Lauren
Nike Banana
Republic
Coach Sears GAP
Scale example from other regions (no. of stores)
140143210
Zara H&M Uniqlo Meters-
bonwe
~1,800
Semir
~4,300
Anta
~7780 Global brands Chinese brands
Emerging market (China):
Developed market
1. Number of stores data as on July 2013, except Anta (as on 31st Dec, 2011) Source: Outletlocation.com, Company Websites, A.T. Kearney Analysis
1519
2225
Next Clarks
Bostonian
Nike GAP
USA: UK:
• Access to newer markets, including first mover advantage in select cases • Improvements in cost structure at store level & corporate level : larger scale in sourcing
& media spend, efficient operations & other overheads, etc. Advantages
Market reach
4. Access: win in digital / Expand Reach
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 12
5. Agility in the market, to drive fast fashion gives significant competitive advantage… integration of all functions is critical
Speed and Agility in Apparel Market
5. Build capabilities on fast fashion
Levers to reduce lead time
Typical lead times
Retail Manufacturing Sourcing Design
• Collaboration between functions to get it “right” the first time
• Advance orders for long-lead time fabrics (E.g. yarn dyed) – early blocking of capacity
• Early forecasts and capacity blocking with key vendors / preliminary costing prior to style finalization
• Pre-packing and cross docking for flow-through of products to store
3 months 4 months 2 months 1 month
Fast fashion lead times
• Focus on product “look” delivery rather than technical “rightness” – fewer approvals / higher design flexibility
• Flexibility in fabric usage; usage of stock fabrics, purchased / left-over greige fabric
• Dedicated capacity blocking for opportunistic production / use of fragmented supply base (1-2 products), parallel manufacturing
• Immediate feedback on market delivery
• Air shipments / part shipments
Retail Manufacturing Sourcing Design
10 days 20 days 10 days 10 days
Design flexibility
Opportunistic sourcing
Parallel production
Tight delivery
Process run in parallel to regular delivery
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 13
6. Hard choices between creativity and materiality is required
6. Design for low costs
Source: A.T. Kearney
SKU complexity (Materials illustration) Complexity Funnel
100% of business (INR) 80% of business (INR)
2
6
Fabric
81
833
Blends
91
722
Brands
17k
65k
SKUs
Le
vel
of
co
mp
lexit
y
Material 1 (1.5%)
Sales Volume (Rs. Crores)
Material 2 (45%)
Material 3 (52%)
Regular (72%)
Top 5 (54%)
5,225
1,096
Exclusives (21%)
Next 10 (25%)
3,785
591
Others (8%)
Bottom 82 (21%)
4,482
336
Others (1.5%)
Product Hierarchy
Fabric
Category
Brand
SKU
Avg. Sales/ SKU (m/SKU)
Level of Complexity
Low
Low
Med
High
Key Design led profitability levers (example)
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 14
In summary, to win, there are six key themes for fashion and lifestyle to debate in this august forum!
Key Winning Themes
1 Create new fields of play
2 Differentiate
3 Tailor
4 Expand access: win in Digital / rural reach
5 Build capabilities to deliver on ‘fast fashion’
6 Design for low cost
A.T. Kearney IN/Winning in Fashion Lifestyle/Perspective 15
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